It is against the law
for gas stations to put a “preauthorization hold” on the bank account of a
customer who pays for gas with a debit card if the hold is for a higher amount
than the price of the fuel and the customer is not informed, state Attorney
General’s Bill Lockyer’s office said Friday.

In an opinion authored
on Lockyer’s behalf, Deputy Attorney General Thomas S. Lazar said the practice
violates the state’s Unfair Competition Law if the hold continues after the gas
is pumped and the transaction concluded.

No reason has been given
why service station owners can’t tell customers that a hold is being placed on
their bank accounts, the opinion said.

“Second, without such
knowledge, these customers may be adversely affected by having their checks
dishonored by their financial institutions or by having to pay overdraft fees
as a result of subsequent uses of their debit cards or checks,” the opinion
said. “Accordingly, in the absence of satisfactory justification for the
business practice and the potential for the practice to be substantially
injurious to debit cardholders, we find that nondisclosure in these
circumstances would constitute a violation of the UCA.”

The issue was raised by
state Sen. Wesley Chesbro, D-Arcata.

More customers have been
paying for gasoline at service stations with debit cards than credit cards.
Some franchises accept only debit cards and cash.

Debit cards operate much
like instant checks, essentially paying for a transaction by withdrawing the
money from the holder’s bank account.

Stations often place
holds on those bank accounts as the customer begins pumping, to make sure there
is enough in the account to pay for the transaction. Unlike with other products
bought with a debit card, the gasoline cannot be returned to the retailer if it
turns out there was not enough money in the account.

If the amount of the
hold does not exceed the price of the fuel that is ultimately purchased or if
the hold is immediately reversed after fueling is finished, the customer need
not know of the hold’s existence, the Attorney General’s Office said.